LAKELAND FINANCIAL CORP 10-Q

ITEM 2 - MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OVERVIEW Net income in the first nine months of 2025 was $73.5 million, which increased $4.2 million , or 6.0%, from $69.3 million for the comparable period of 2024 . Diluted earnings per common share was $2.85 in the first nine months of 2025 , an increase of 5.9% from $2.69 in the comparable period of 2024 . The increase in net income for 2025 was primarily due to an increase to net interest income of $18.8 million, or 13.0%, and a decrease in the provision for credit losses of $1.3 million, or 9.6%. Offsetting these positive contributions was a decrease in noninterest income of $9.6 million, or 21.3%, and an increase in noninterest expense of $3.7 million, or 3.9%. Pretax pre-provision earnings, a non-GAAP measure calculated by adding net interest income to noninterest income and subtracting noninterest expense, were $101.0 million in the first nine months of 2025 , an increase of $5.5 million , or 5.8%, compared to $95.5 million for the comparable period of 2024 . Core operational profitability, a non-GAAP measure that excludes the impact of certain non-routine operating events that occurred during 2024, improved by $8.3 million , or 12.7%, from $65.2 million to $73.5 million for the nine months ended September 30, 2024 and 2025, respectively. Return on average total equity was 13.96% in the first nine months of 2025 versus 14.21% in the comparable period of 2024 . Return on average total assets was 1.44% in the first nine months of 2025 versus 1.40% for the comparable period of 2024 . The Company's average equity to average assets ratio was 10.29% in the first nine months of 2025 versus 9.84% in the comparable period of 2024 . Net income in the third quarter of 2025 was $26.4 million, an increase of $3.1 million, or 13.1%, from $23.3 million for the comparable period of 2024. Diluted earnings per common share was $1.03 in the third quarter of 2025, an increase of 13.2% from $0.91 in the comparable period of 2024. The increase was driven primarily by an increase in net interest income of $6.8 million, or 13.8%, a decrease in provision for credit losses of $1.1 million, or 34.6% and an increase in noninterest income of $1.0 million, or 8.7%. Offsetting these positive contributions was an increase in noninterest expense of $4.6 million, or 15.0%. Pretax pre-provision earnings in the third quarter of 2025 were $34.1 million, an increase of $3.3 million, or 10.6%, compared to $30.8 million for the comparable period of 2024. Return on average total equity was 14.60% in the third quarter of 2025 versus 13.85% in the comparable period of 2024. Return on average total assets was 1.53% in the third quarter of 2025 versus 1.39% in the comparable period of 2024. The average equity to average assets ratio was 10.47% in the third quarter of 2025 versus 10.07% in the comparable period of 2024. The Company’s tangible common equity to tangible assets ratio, which is a non-GAAP financial measure, was 10.79% at September 30, 2025, improved from 10.47% at September 30, 2024 and 10.19% at December 31, 2024. Unrealized losses from available-for-sale investment securities were $159.9 million at September 30, 2025, compared to $154.5 million at September 30, 2024 and $191.1 million at December 31, 2024. When excluding the impact of accumulated other comprehensive income (loss) ("AOCI") on tangible common equity and tangible assets, the Company's adjusted tangible common equity to adjusted tangible assets ratio, which is a non-GAAP financial measure, was 12.57% at September 30, 2025, improved from 12.29% at September 30, 2024 and 12.37% at December 31, 2024. Total assets were $6.895 billion as of September 30, 2025 versus $6.678 billion as of December 31, 2024, an increase of $216.7 million, or 3.2% . Balance sheet expansion was driven by increases to t otal loans, net of the allowance for credit losses, which increased $148.5 million, or 3.0%, available-for-sale securities, which increased $40.5 million, or 4.1%, and cash and cash equivalents, which increased $24.6 million, or 14.6%. The balance sheet expansion from December 31, 2024 to September 30, 2025 was funded by an increase in total deposits of $123.4 million, or 2.1%, and borrowings of $56.2 million. Total equity increased $63.6 million, or 9.3%, from $683.9 million at December 31, 2024 to $747.5 million at September 30, 2025. Retained earnings increased $34.9 million, or 4.7%, primarily as a result of net income of $73.5 million less dividends declared and paid of $38.6 million and an improvement in accumulated other comprehensive income (loss) of $25.8 million. CRITICAL ACCOUNTING POLICIES The Company’s accounting policies are described in Note 1 to the consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2024. Certain of the Company’s accounting policies are important to the portrayal of the Company’s financial condition, since they require management to make difficult, complex or subjective judgments, some of which may relate to matters that 39 Table of Contents are inherently uncertain. Estimates associated with these policies are susceptible to material changes as a result of changes in facts and circumstances. Some of the facts and circumstances which could affect these judgments include changes in interest rates, in the performance of the economy or in the financial condition of borrowers. Management believes that its critical accounting policies include determining the allowance for credit losses. See “Note 4 – Allowance for Credit Losses and Credit Quality” for more information on this critical accounting policy. RESULTS OF OPERATIONS Overview Selected income statement information for the three and nine months ended September 30, 2025 and 2024 is presented in the following table: Three Months Ended September 30, Nine Months Ended September 30, (dollars in thousands) 2025 2024 2025 2024 Income Statement Summary: Net interest income (A) $ 56,073 49,273 $ 163,824 $ 144,985 Provision for credit losses 2,000 3,059 11,800 13,059 Noninterest income (B) 12,954 11,917 35,368 44,968 Noninterest expense (C) 34,965 30,393 98,160 94,431 Other Data: Efficiency ratio (1) 50.65 % 49.67 % 49.28 % 49.71 % Diluted EPS $ 1.03 $ 0.91 $ 2.85 $ 2.69 Average Equity/Average Assets 10.47 % 10.07 % 10.29 % 9.84 % Tangible capital ratio (2) 10.79 10.47 10.79 10.47 Adjusted tangible capital ratio (3) 12.57 12.29 12.57 12.29 Net charge-offs to average loans 0.03 0.01 0.76 0.04 Net interest margin 3.50 3.16 3.44 3.16 Noninterest income to total revenue 18.77 19.48 17.76 23.67 Pretax pre-provision earnings (4) $ 34,062 $ 30,797 $ 101,032 $ 95,522 (1) Noninterest expense (C) / (Net interest income (A) + Noninterest income (B)) = Efficiency Ratio (2) Non-GAAP financial measure. Calculated by subtracting intangible assets, net of deferred tax, from total assets and total equity. Management believes this is an important measure because it is useful for planning and forecasting purposes. See reconciliation on the following pages. (3) Non-GAAP financial measure. Calculated by removing the fair market value adjustment impact of the available-for-sale investment securities portfolio included in accumulated other comprehensive income (loss) ("AOCI") from tangible equity and tangible assets. Management believes this is an important measure because it provides better comparability to periods preceding the recent increase in prevailing interest rates and demonstrates long-term trends capital strength. See reconciliation on the following pages. (4) Non-GAAP financial measure. Pretax pre-provision earnings is calculated by adding net interest income to noninterest income and subtracting noninterest expense. Management believes this is an important measure because it may enable investors to identify the trends in the Company's earnings exclusive of the effects of tax and provision expense, which may vary significantly from period to period. See reconciliation on the following pages. 40 Table of Contents The Company believes that providing non-GAAP financial measures provides investors with information useful to understanding the Company's financial performance. Tangible common equity, adjusted tangible common equity, tangible assets, adjusted tangible assets, tangible book value per common share, tangible common equity to tangible assets, adjusted tangible common equity to adjusted tangible assets, and pretax pre-provision earnings are non-GAAP financial measures calculated based on GAAP amounts. Tangible common equity is calculated by excluding the balance of goodwill and other intangible assets from the calculation of equity, net of deferred tax. Tangible assets are calculated by excluding the balance of goodwill and other intangible assets from the calculation of total assets, net of deferred tax. Adjusted tangible assets and adjusted tangible common equity remove the fair market value adjustment impact of the available-for-sale investment securities portfolio in accumulated other comprehensive income (loss) ("AOCI"). Tangible book value per common share is calculated by dividing tangible common equity by the number of shares outstanding less true treasury stock. Pretax pre-provision earnings is calculated by adding net interest income to noninterest income and subtracting noninterest expense. Because not all companies use the same calculation of tangible common equity and tangible assets, this presentation may not be comparable to other similarly titled measures calculated by other companies. However, management considers these measures of the Company’s value meaningful to understanding of the Company’s financial information and performance. A reconciliation of these non-GAAP financial measures is provided below. As of and For The As of and For The Three Months Ended September 30, Nine Months Ended September 30, (dollars in thousands, except per share data) 2025 2024 2025 2024 Total Equity $ 747,503 $ 699,181 $ 747,503 $ 699,181 Less: Goodwill (4,970) (4,970) (4,970) (4,970) Plus: Deferred Tax Assets Related to Goodwill 1,167 1,167 1,167 1,167 Tangible Common Equity (A) 743,700 695,378 743,700 695,378 Market Value Adjustment in AOCI 140,165 137,435 140,165 137,435 Adjusted Tangible Common Equity (C) 883,865 832,813 883,865 832,813 Total Assets $ 6,895,028 $ 6,645,371 $ 6,895,028 $ 6,645,371 Less: Goodwill (4,970) (4,970) (4,970) (4,970) Plus: Deferred Tax Assets Related to Goodwill 1,167 1,167 1,167 1,167 Tangible Assets (B) 6,891,225 6,641,568 6,891,225 6,641,568 Market Value Adjustment in AOCI 140,165 137,435 140,165 137,435 Adjusted Tangible Assets (D) 7,031,390 6,779,003 7,031,390 6,779,003 Ending Common Shares Issued (E) 25,704,243 25,684,916 25,704,243 25,684,916 Tangible Book Value per Common Share (A/E) $ 28.93 $ 27.07 $ 28.93 $ 27.07 Tangible Capital Ratio (A/B) 10.79 % 10.47 % 10.79 % 10.47 % Adjusted Tangible Capital Ratio (C/D) 12.57 % 12.29 % 12.57 % 12.29 % Net Interest Income $ 56,073 $ 49,273 $ 163,824 $ 144,985 Plus: Noninterest Income 12,954 11,917 35,368 44,968 Minus: Noninterest Expense (34,965) (30,393) (98,160) (94,431) Pretax Pre-Provision Earnings $ 34,062 $ 30,797 $ 101,032 $ 95,522 41 Table of Contents Adjusted core noninterest income, adjusted core noninterest expense, adjusted earnings before income taxes, core operational profitability, core operational diluted earnings per common share and adjusted core efficiency ratio are non-GAAP financial measures calculated based on GAAP amounts. These adjusted amounts are calculated by excluding the impact of the net gain on Visa shares, legal accrual and insurance recovery for the periods presented below. Management considers these measures of financial performance to be meaningful to understanding the Company’s core business performance for these periods. A reconciliation of these non-GAAP financial measures is provided below. Three Months Ended Nine Months Ended (dollars in thousands, except per share data) Sep. 30, 2025 Sep. 30, 2024 Sep. 30, 2025 Sep. 30, 2024 Noninterest Income $ 12,954 $ 11,917 $ 35,368 $ 44,968 Less: Net (Gain) Loss on Visa Shares 0 15 0 (8,996) Less: Insurance Recovery 0 0 0 (1,000) Adjusted Core Noninterest Income $ 12,954 $ 11,932 $ 35,368 $ 34,972 Noninterest Expense $ 34,965 $ 30,393 $ 98,160 $ 94,431 Less: Legal Accrual 0 0 0 (4,537) Adjusted Core Noninterest Expense $ 34,965 $ 30,393 $ 98,160 $ 89,894 Earnings Before Income Taxes $ 32,062 $ 27,738 $ 89,232 $ 82,463 Adjusted Core Impact: Noninterest Income 0 15 0 (9,996) Noninterest Expense 0 0 0 4,537 Total Adjusted Core Impact 0 15 0 (5,459) Adjusted Earnings Before Income Taxes 32,062 27,753 89,232 77,004 Tax Effect (5,658) (4,404) (15,777) (11,817) Core Operational Profitability (1) $ 26,404 $ 23,349 $ 73,455 $ 65,187 Diluted Earnings Per Common Share $ 1.03 $ 0.91 $ 2.85 $ 2.69 Impact of Adjusted Core Items 0.00 0.00 0.00 (0.16) Core Operational Diluted Earnings Per Common Share $ 1.03 $ 0.91 $ 2.85 $ 2.53 Adjusted Core Efficiency Ratio 50.65 % 49.66 % 49.28 % 49.95 % (1) Core operational profitability was $11,000 higher than reported net income for the three months ended September 30, 2024 and $4.1 million lower for the nine months ended September 30, 2024. Net Income Net income was $73.5 million in the first nine months of 2025, which increased $4.2 million , or 6.0%, from $69.3 million for the comparable period of 2024 . Diluted earnings per common share was $2.85 in the first nine months of 2025 , an increase of 5.9% from $2.69 in the comparable period of 2024 . The increase in net income for the first nine months of 2025 was primarily due to an increase to net interest income of $18.8 million, or 13.0%, and a decrease in the provision for credit losses of $1.3 million, or 9.6%. Offsetting these positive contributions was a decrease to noninterest income of $9.6 million, or 21.3%, and an increase in noninterest expense of $3.7 million, or 3.9%. Core operational profitability, a non-GAAP measure that excludes the impact of certain non-routine operating events that occurred during 2024, improved by $8.3 million , or 12.7%, from $65.2 million to $73.5 million for the nine months ended September 30, 2024 and 2025, respectively. Net income during the third quarter of 2025 was $26.4 million, an improvement of 13.1% from $23.3 million for the comparable period of 2024. Diluted earnings per common share was $1.03 in the third quarter of 2025, an increase of 13.2% from $0.91 in the comparable period of 2024. The increase was driven primarily by an increase in net interest income of $6.8 million, or 13.8%, a decrease in the provision for credit losses of $1.1 million, or 34.6%, and an increase in noninterest income 42 Table of Contents of $1.0 million, or 8.7%. Offsetting these positive contributions was an increase in noninterest expense of $4.6 million, or 15.0%. N et Interest Income The following tables set forth consolidated information regarding average balances and rates: Nine Months Ended September 30, 2025 2024 (fully tax equivalent basis, dollars in thousands) Average Balance Interest Income Yield (1)/ Rate Average Balance Interest Income Yield (1)/ Rate Earning Assets Loans: Taxable (2)(3) $ 5,181,704 $ 251,648 6.49 % $ 4,982,891 $ 252,386 6.77 % Tax exempt (1) 25,501 1,074 5.63 40,665 2,267 7.45 Investments: Securities (1) 1,129,664 25,199 2.98 1,135,304 23,987 2.82 Short-term investments 2,863 83 3.88 2,796 103 4.92 Interest bearing deposits 158,511 5,049 4.26 119,021 4,618 5.18 Total earning assets $ 6,498,243 $ 283,053 5.82 % $ 6,280,677 $ 283,361 6.03 % Less: Allowance for credit losses (82,671) (76,003) Nonearning Assets Cash and due from banks 66,766 65,608 Premises and equipment 62,079 58,695 Other nonearning assets 295,345 289,125 Total assets $ 6,839,762 $ 6,618,102 Interest Bearing Liabilities Savings deposits $ 284,797 $ 127 0.06 % $ 288,283 $ 141 0.07 % Interest bearing checking accounts 3,662,917 90,955 3.32 3,206,452 97,511 4.06 Time deposits: In denominations under $100,000 208,872 5,255 3.36 218,755 5,702 3.48 In denominations over $100,000 595,367 17,678 3.97 814,034 27,729 4.55 Short-term borrowings 54,706 1,888 4.61 88,605 3,720 5.61 Long-term borrowings 888 0 0.00 0 0 0.00 Total interest bearing liabilities $ 4,807,547 $ 115,903 3.22 % $ 4,616,129 $ 134,803 3.90 % Noninterest Bearing Liabilities Demand deposits 1,248,876 1,249,710 Other liabilities 79,775 100,806 Stockholders' Equity 703,564 651,457 Total liabilities and stockholders' equity $ 6,839,762 $ 6,618,102 Interest Margin Recap Interest income/average earning assets 283,053 5.82 % 283,361 6.03 % Interest expense/average earning assets 115,903 2.38 134,803 2.87 Net interest income and margin $ 167,150 3.44 % $ 148,558 3.16 % (1) Tax exempt income was converted to a fully taxable equivalent basis at a 21 percent tax rate. The tax equivalent rate for tax exempt loans and tax exempt securities acquired after January 1, 1983 included the Tax Equity and Fiscal Responsibility Act of 1982 (“TEFRA”) adjustment applicable to nondeductible interest expenses. Taxable equivalent basis adjustments were $3.3 million and $3.6 million for the nine-month periods ended September 30, 2025 and September 30, 2024, respectively. (2) Loan fees, which are immaterial in relation to total taxable loan interest income for the nine months ended September 30, 2025 and 2024, are included as taxable loan interest income. (3) Nonaccrual loans are included in the average balance of taxable loans. 43 Table of Contents Three Months Ended September 30, 2025 2024 (fully tax equivalent basis, dollars in thousands) Average Balance Interest Income Yield (1)/ Rate Average Balance Interest Income Yield (1)/ Rate Earning Assets Loans: Taxable (2)(3) $ 5,180,847 $ 85,490 6.55 % $ 5,037,855 $ 86,118 6.80 % Tax exempt (1) 24,986 354 5.62 26,493 366 5.50 Investments: Securities (1) 1,127,094 8,444 2.97 1,128,705 7,871 2.77 Short-term investments 2,795 27 3.83 2,841 35 4.90 Interest bearing deposits 156,918 1,679 4.25 133,393 1,738 5.18 Total earning assets $ 6,492,640 95,994 5.87 % $ 6,329,287 96,128 6.04 % Less: Allowance for credit losses (67,115) (81,353) Nonearning Assets Cash and due from banks 62,671 63,744 Premises and equipment 64,391 59,493 Other nonearning assets 298,084 285,293 Total assets $ 6,850,671 $ 6,656,464 Interest Bearing Liabilities Savings deposits $ 284,553 $ 41 0.06 % $ 280,180 $ 45 0.06 % Interest bearing checking accounts 3,731,706 31,382 3.34 3,295,911 33,822 4.08 Time deposits: In denominations under $100,000 204,997 1,678 3.25 215,020 1,914 3.54 In denominations over $100,000 563,920 5,345 3.76 844,882 9,775 4.60 Short-term borrowings 31,739 368 4.60 13,752 189 5.48 Long-term borrowings 1,200 0 0.00 0 0 0.00 Total interest bearing liabilities $ 4,818,115 $ 38,814 3.20 % $ 4,649,745 $ 45,745 3.91 % Noninterest Bearing Liabilities Demand deposits 1,244,381 1,244,184 Other liabilities 70,747 92,375 Stockholders' Equity 717,428 670,160 Total liabilities and stockholders' equity $ 6,850,671 $ 6,656,464 Interest Margin Recap Interest income/average earning assets 95,994 5.87 % 96,128 6.04 % Interest expense/average earning assets 38,814 2.37 45,745 2.88 Net interest income and margin $ 57,180 3.50 % $ 50,383 3.16 % (1) Tax exempt income was converted to a fully taxable equivalent basis at a 21 percent tax rate. The tax equivalent rate for tax exempt loans and tax exempt securities acquired after January 1, 1983 included the Tax Equity and Fiscal Responsibility Act of 1982 (“TEFRA”) adjustment applicable to nondeductible interest expenses. Taxable equivalent basis adjustments were $1.1 million and $1.1 million in the three-month periods ended September 30, 2025 and September 30, 2024, respectively. (2) Loan fees, which are immaterial in relation to total taxable loan interest income for the three months ended September 30, 2025 and 2024, are included as taxable loan interest income . (3) Nonaccrual loans are included in the average balance of taxable loans. 44 Table of Contents Net interest income, on a fully tax equivalent basis, increased $18.6 million, or 12.5%, to $167.2 million for the nine months ended September 30, 2025, compared to $148.6 million for the first nine months of 2024 . The increase in net interest income on a fully tax equivalent basis was driven by a decrease in deposit interest expense of $17.1 million , or 13.0% , from $131.1 million to $114.0 million . Borrowings expense declined by $1.8 million , or 49.2% . Securities interest income contributed further to the increase in fully tax equivalent net interest income, increasing by $1.2 million , or 5.1% . A decline in loan interest income negatively impacted fully tax equivalent net interest income, decreasing $1.9 million, or 0.8%, from $254.7 million to $252.7 million between the two periods, due primarily to the decline in interest income from variable rate loans that resulted from the decline in interest rates. Total average earning assets were $6.498 billion for the nine months ended September 30, 2025, an increase of $217.6 million, or 3.5%, compared to $6.281 billion for the nine months ended September 30, 2024 . Average loans outstanding drove the increase to total average earning assets, increasing $183.6 million, or 3.7%, to $5.207 billion from $5.024 billion for the nine months ended September 30, 2025 and 2024, respectively . Offsetting this increase was a decrease to average investment securities of $5.6 million, or 0.5%, to $1.130 billion from $1.135 billion between the respective periods . Total average interest bearing liabilities were $4.808 billion for the nine months ended September 30, 2025, an increase of $191.4 million, or 4.1%, from $4.616 billion for the nine months ended September 30, 2024. This increase was driven by growth in average interest bearing deposits of $224.4 million, or 5.0%, from $4.528 billion for the nine months ended September 30, 2024 to $4.752 billion for the nine months ended September 30, 2025. Offsetting the increase to average interest bearing deposits was a decrease in total average borrowings of $33.0 million, or 37.3%, to $55.6 million from $88.6 million for the nine months ended September 30, 2025 and 2024 , respectively. Noninterest bearing demand deposits decreased $834,000, or 0.1%, to $1.249 billion from $1.250 billion between the two periods. The tax equivalent net interest margin was 3.44% for the nine months ended September 30, 2025, compared to 3.16% during the first nine months of 2024, representing a 28 basis point expansion between the two periods. The net interest margin increase was primarily driven by a decrease to interest expense as a percentage of average earning assets, which decreased to 2.38% for the nine months ended September 30, 2025 , down from 2.87% for the comparable period of 2024, or a decrease of 49 basis points. This decline was attributable to a decrease in the rate for total interest bearing liabilities of 68 basis points from 3.90% to 3.22% between the respective periods. These decreases were driven by reduced costs associated with the repricing of the Company's interest bearing deposits and borrowings as a result of monetary policy easing from the Federal Reserve Bank. The decrease in the rate for interest bearing liabilities was driven by a decrease in the average rate for interest bearing deposits of 66 basis points, from 3.87% to 3.21%. Contributing further to the reduction in the rate for interest bearing liabilities was a reduction in the average borrowings rate, which declined 107 basis points from 5.61% to 4.54%. The Company anticipates the cost of funds would continue to respond favorably to any further monetary policy easing by the Federal Reserve Bank. The improvement in interest expense as a percentage of average earning assets was offset by a 21 basis point reduction in interest income as a percentage of average earning assets, which declined fro m 6.03% to 5.82%. This decrease was primarily attributable to a decline in average loan yields, which decreased 28 basis points to 6.49% for the nine months ended September 30, 2025, down from 6.77% for the comparable period of 2024. This decrease was offset by an increase to investment securities yields, which increased 16 basis points from 2.82% to 2.98%. The Company expects that any continued easing of monetary policy by the Federal Reserve Bank, which commenced in September 2024, would exert downward pressure on loan yields as variable rate commercial loans reprice lower. During the nine months ended September 30, 2025, the Company recorded a prepayment fee of $541,000 from the early payment of a fixed rate commercial loan, which was recorded as part of interest income. The prepayment fee benefited tax equivalent net interest margin by 1 basis point during the nine months ended September 30, 2025. Net interest income, on a fully tax equivalent basis, increased by $6.8 million, or 13.5% , for the three months ended September 30, 2025 as compared to the three months ended September 30, 2024. The increase in net interest income on a fully tax equivalent basis was driven by a decrease in deposit interest expense of $7.1 million , or 15.6% , from $45.6 million to $38.4 million. Securities interest income increased $573,000, or 7.3%, from $7.8 million to $8.4 million between the two periods. A decline in loan interest income negatively impacted fully tax equivalent net interest income, decreasing $640,000, or 0.7%, from $86.5 million to $85.8 million. Borrowings expense increased $179,000, or 94.7%, from $189,000 to $368,000. Total average earning assets were $6.493 billion for the third quarter of 2025, an increase of $163.4 million, or 2.6%, compared to $6.329 billion for the third quarter of 2024. The increase in average earning assets was driven by an increase in average loans of $141.5 million, or 2.8%, from $5.064 billion for the third quarter of 2024 to $5.206 billion for the third quarter of 2025. Average investment securities decreased $1.6 million, or 0.1%, from $1.129 billion for the third quarter of 2024 to $1.127 billion for the third quarter of 2025. Total average interest bearing liabilities were $4.818 billion for the third quarter of 2025, an increase of $168.4 million, or 3.6%, from $4.650 billion for the third quarter of 2024. This increase was driven by growth in interest bearing deposits of $149.2 million, or 3.2%, from $4.636 billion for the third quarter of 2024 to $4.785 billion for the third quarter of 2025. Noninterest bearing demand deposits increased $197,000, or 0.2%, at $1.244 billion for the 45 Table of Contents third quarter of 2025 and 2024. Average borrowings increased $19.2 million, or 139.5%, from $13.8 million for the third quarter of 2024 to $32.9 million for the third quarter of 2025. The tax equivalent net interest margin expanded by 34 basis points, or 10.8%, to 3.50% for the third quarter of 2025, compared to 3.16% for the third quarter of 2024 . The net interest margin expansion was primarily driven by a decrease in interest expense as a percentage of average earning assets, which decreased to 2.37% for the three months ended September 30, 2025 , down from 2.88% for the comparable period of 2024 , for a decrease of 51 basis points. This decrease was attributable to a decrease in the rate for total interest bearing liabilities of 71 basis points from 3.91% to 3.20% between the respective periods. This decrease was driven by reduced costs associated with the repricing of the Company's interest bearing deposits and borrowings as a result of monetary policy easing from the Federal Reserve Bank. The average rate for interest bearing deposits declined 72 basis points fro m 3.91% to 3.19% . Contributing further to the reduction in the rate for interest bearing liabilities was a reduction in the average borrowings rate, which declined 105 basis points from 5.48% to 4.43%. Th e improvement in interest expense as a percentage of average earning assets was offset by a 17 basis point reduction in interest income as a percentage of average earning assets, which declined from 6.04% for the third quarter of 2024 to 5.87% for the third quarter of 2025. This decrease was primarily attributable to a decrease in loan yields, which decreased 25 basis points from 6.79% to 6.54% between the two periods. This decrease was offset by an increase to investment securities yields, which increased 20 basis points from 2.77% to 2.97% between the two periods. Provision for Credit Losses The Company recorded provision for credit losses expense of $11.8 million for the nine months ended September 30, 2025, compared to provision expense of $13.1 million during the comparable period of 2024, a decrease of $1.3 million, or 9.6%. Net charge-offs were $29.6 million during the nine month period ended September 30, 2025, compared to $1.4 million during the comparable period of 2024, an increase of $28.2 million. The increase in net charge offs between the respective periods was attributable to a partial charge off related to a previously disclosed nonperforming credit for an industrial company in Northern Indiana. This credit was reserved for prior to the partial charge off. The Company recorded provision expense of $2.0 million during the third quarter of 2025, compared to $3.1 million during the third quarter of 2024. Net charge-offs were $384,000 during the third quarter of 2025 compared to $143,000 during the third quarter of 2024. Additional factors considered by management in determining provision expense included key loan quality metrics, reserve coverage of nonperforming loans, economic conditions in the Company’s markets, and changes in the facts and circumstances of watch list credits, which includes the security position of the borrower. Management’s overall view on current credit quality was also a factor in the determination of the provision for credit losses. The Company’s management continues to monitor the adequacy of the provision based on loan levels, asset quality, economic conditions and other factors that may influence the assessment of the collectability of loans. 46 Table of Contents Noninterest Income Noninterest income categories for the three and nine months ended September 30, 2025 and 2024 are shown in the following tables: Nine Months Ended September 30, (dollars in thousands) 2025 2024 Dollar Change Percent Change Wealth advisory fees $ 8,389 $ 7,770 $ 619 8.0 % Investment brokerage fees 1,559 1,438 121 8.4 Service charges on deposit accounts 8,522 8,332 190 2.3 Loan and service fees 9,309 8,855 454 5.1 Merchant and interchange fee income 2,568 2,653 (85) (3.2) Bank owned life insurance income 2,929 2,994 (65) (2.2) Interest rate swap fee income 20 0 20 100.0 Mortgage banking income (loss) 67 68 (1) (1.5) Net securities gains (losses) 0 (46) 46 100.0 Net gain (loss) on Visa shares 0 8,996 (8,996) (100.0) Other income 2,005 3,908 (1,903) (48.7) Total noninterest income $ 35,368 $ 44,968 $ (9,600) (21.3) % Noninterest income to total revenue 17.76 % 23.67 % Three Months Ended September 30, (dollars in thousands) 2025 2024 Dollar Change Percent Change Wealth advisory fees $ 2,855 $ 2,718 $ 137 5.0 % Investment brokerage fees 557 438 119 27.2 Service charges on deposit accounts 2,921 2,835 86 3.0 Loan and service fees 3,419 2,955 464 15.7 Merchant and interchange fee income 892 898 (6) (0.7) Bank owned life insurance income 1,567 1,068 499 46.7 Mortgage banking income (loss) (6) (7) 1 (14.3) Net gain (loss) on Visa shares 0 (15) 15 (100.0) Other income 749 1,027 (278) (27.1) Total noninterest income $ 12,954 $ 11,917 $ 1,037 8.7 % Noninterest income to total revenue 18.77 % 19.48 % Noninterest income decreased by $9.6 million, or 21.3%, to $35.4 million for the nine months ended September 30, 2025, compared to $45.0 million for the prior year nine-month period. Noninterest income was elevated during the first nine months of 2024 as compared to the comparable period of 2025 primarily because of the net gain on Visa shares of $9.0 million and a $1.0 million insurance recovery. Adjusted core noninterest income, a non-GAAP financial measure that excludes the impact of these non-routine events, improved $396,000, or 1.1%, to $35.4 million from $35.0 million for the nine months ended September 30, 2025 and 2024, respectively. Wealth advisory fees improved $619,000, or 8.0%, loan and service fees improved $454,000, or 5.1%, service charges on deposit accounts improved $190,000, or 2.3%, and investment brokerage fees improved $121,000, or 8.4%. The increase to wealth advisory fees was driven by continued growth in customers and assets under management. Loan and service fees income benefitted from the recognition of a loan syndication fee in Indianapolis. Investment brokerage fees was driven higher by increased volume and commissions on product mix. Other income decreased $1.9 million, or 48.7%. Other income during the first nine months of 2024 benefited from the $1.0 million insurance recovery. Additionally, reduced limited partnership investment income further contributed to the decline between the periods. 47 Table of Contents The Company’s noninterest income increased $1.0 million, or 8.7%, to $13.0 million for the third quarter of 2025, compared to $11.9 million for the third quarter of 2024. Loan and service fees income increased $464,000, or 15.7%, wealth advisory fees increased $137,000, or 5.0%, and investment brokerage fees increased $119,000, or 27.2%. Bank owned life insurance income increased $499,000, or 46.7%, from increased income from additional general account policies purchased in 2025 and from improved market performance of the bank's variable owned life insurance policies, which correlate to returns in the equities markets. Offsetting these increases was a decrease to other income of $278,000, or 27.1%, primarily driven by reduced limited partnership investment income. Noninterest Expense Noninterest expense categories for the three and nine months ended September 30, 2025 and 2024 are shown in the following tables: Nine Months Ended September 30, (dollars in thousands) 2025 2024 Dollar Change Percent Change Salaries and employee benefits $ 55,412 $ 49,467 $ 5,945 12.0 % Net occupancy expense 5,604 5,159 445 8.6 Equipment costs 4,294 4,207 87 2.1 Data processing fees and supplies 12,533 11,419 1,114 9.8 Corporate and business development 4,129 4,015 114 2.8 FDIC insurance and other regulatory fees 2,517 2,571 (54) (2.1) Professional fees 5,812 6,675 (863) (12.9) Other expense 7,859 10,918 (3,059) (28.0) Total noninterest expense $ 98,160 $ 94,431 $ 3,729 3.9 % Efficiency ratio 49.28 % 49.71 % Three Months Ended September 30, (dollars in thousands) 2025 2024 Dollar Change Percent Change Salaries and employee benefits $ 20,414 $ 16,476 $ 3,938 23.9 % Net occupancy expense 1,877 1,721 156 9.1 Equipment costs 1,475 1,452 23 1.6 Data processing fees and supplies 4,116 3,768 348 9.2 Corporate and business development 1,563 1,369 194 14.2 FDIC insurance and other regulatory fees 878 966 (88) (9.1) Professional fees 1,726 2,089 (363) (17.4) Other expense 2,916 2,552 364 14.3 Total noninterest expense $ 34,965 $ 30,393 $ 4,572 15.0 % Efficiency ratio 50.65 % 49.67 % Noninterest expense increased by $3.7 million, or 3.9%, for the nine months ended September 30, 2025 to $98.2 million compared to $94.4 million for the nine months ended September 30, 2024. Salaries and employee benefits expense increased $5.9 million, or 12.0%, due to performance-based incentive compensation accruals of $3.8 million, salaries and wages of $2.3 million, and health insurance of $385,000. Offsetting these increases was a decrease in variable deferred compensation expense of $549,000. Data processing fees and supplies expense increased $1.1 million, or 9.8%, and net occupancy expense increased $445,000, or 8.6%. The increase to data processing fees and supplies expense was driven by continued investment in customer-facing and operational technology solutions. Net occupancy expense increased due to the continued expansion of the Bank's physical branch network, with the Bank's 55th branch location opening in Westfield, Indiana, during the third quarter. Offsetting these increases was a decrease to other expense of $3.1 million, or 28.0%, and a decrease in professional fees of $863,000, or 12.9%. Adjusted core noninterest expense, a non-GAAP financial measure, increased $8.3 million, or 9.2%, to $98.2 million from $89.9 million at September 30, 2025 and 2024, respectively. Noninterest expense increased $4.6 million, or 15.0%, to $35.0 million for the third quarter of 2025, compared to $30.4 million during the third quarter of 2024. Salaries and benefits expense increased by $3.9 million, or 23.9%, primarily the result of increased accruals related to performance-based incentive compensation plans. Other expense increased by $364,000, or 14.3%, was driven by semi-annual stock-based compensation awards to directors, which are paid in January and July. Data 48 Table of Contents and processing fees and supplies expense increased $348,000, or 9.2%. Corporate and business development expense increased $194,000, or 14.2%, due to increased advertising spending, corporate development expenses, and charitable and community-driven contributions. Net occupancy expense expanded by $156,000, or 9.1%. Offsetting these increases was a decrease to professional fees of $363,000, or 17.4%. The Company's income tax expense increased $2.6 million, or 19.7%, to $15.8 million in the nine months ended September 30, 2025, compared to $13.2 million for the same period in 2024. The effective tax rate was 17.7% in the nine months ended September 30, 2025, compared to 16.0% for the comparable period of 2024, driven by a reduction in the tax benefit recognized from stock-based compensation vesting of shares for plan participants. On July 4, 2025, the United States enacted tax reform legislation through the One Big Beautiful Bill Act, which changes existing U.S. tax laws, including extending or making permanent certain provisions of the Tax Cuts and Jobs Act and repealing certain clean energy initiatives, in addition to other changes. The Company anticipates an insignificant impact to deferred tax assets and liabilities and to income taxes payable in the period of enactment. The Company continues to evaluate the impact the new legislation will have on the consolidated financial statements. FINANCIAL CONDITION Overview Total assets were $6.895 billion as of September 30, 2025 versus $6.678 billion as of December 31, 2024, an increase of $216.7 million, or 3.2% . Balance sheet expansion was driven by increases to t otal loans, net of the allowance for credit losses, which increased $148.5 million, or 3.0%, available-for-sale securities, which increased $40.5 million, or 4.1%, and cash and cash equivalents, which increased $24.6 million, or 14.6%. The balance sheet expansion from December 31, 2024 to September 30, 2025 was funded by an increase in total deposits of $123.4 million, or 2.1% and borrowings of $56.2 million. The increase in total deposits was driven by an increase in interest bearing deposits of $152.6 million, or 3.3%, and was offset by a decrease in noninterest bearing deposits of $29.2 million, or 2.3%. Total equity increased $63.6 million, or 9.3%, from $683.9 million at December 31, 2024 to $747.5 million at September 30, 2025. Retained earnings increased $34.9 million, or 4.7%, as a result of net income of $73.5 million less dividends declared and paid of $38.6 million and an improvement in accumulated other comprehensive income (loss) of $25.8 million. Uses of Funds Total Cash and Cash Equivalents Total cash and cash equivalents increased by $24.6 million, or 14.6%, to $192.8 million at September 30, 2025, from $168.2 million at December 31, 2024. Cash and cash equivalents include short-term investments. The fluctuation in cash and cash equivalents at September 30, 2025 was driven by an increase in interest bearing short-term investment accounts of $28.9 million, or 29.9%, which were deposited primarily at the Federal Reserve Bank of Chicago. Cash and due from banks decreased $4.2 million, or 5.9%. 49 Table of Contents Investment Portfolio The amortized cost and the fair value of securities as of September 30, 2025 and December 31, 2024 were as follows: September 30, 2025 December 31, 2024 (dollars in thousands) Amortized Cost Fair Value Amortized Cost Fair Value Available-for-Sale U.S Treasury securities $ 5,011 $ 5,001 $ 0 $ 0 U.S government sponsored agencies 139,611 117,067 137,150 109,435 Mortgage-backed securities: residential 504,570 448,208 500,278 422,409 State and municipal securities 542,672 461,662 545,073 459,582 Total available-for-sale $ 1,191,864 $ 1,031,938 $ 1,182,501 $ 991,426 Held-to-Maturity State and municipal securities $ 132,799 $ 113,804 $ 131,568 $ 113,107 Total Investment Portfolio $ 1,324,663 $ 1,145,742 $ 1,314,069 $ 1,104,533 At September 30, 2025 and December 31, 2024, there were no holdings of securities of any one issuer, other than the U.S. government agencies and government sponsored entities, in an amount greater than 10% of stockholders’ equity. Management is aware that the directional change in the fair value of the available-for-sale investment securities portfolio is inversely related to the directional movement of the interest rate environment, with the resulting impact being reflected in the unrealized gain (loss) of the available-for-sale investment securities portfolio. Since the majority of the bonds in the investment portfolio are fixed-rate, with only a few adjustable-rate bonds, we would expect our investment portfolio to follow this market value pattern. This is taken into consideration when evaluating the gain or loss of investment securities in the portfolio and the potential for an allowance for credit losses. Purchases of available-for-sale securities were $60.3 million in the first nine months of 2025. Investment securities represented 16.9% of total assets on September 30, 2025, compared to 16.8% of total assets on December 31, 2024. The Company anticipates receiving principal and interest cash flows of approximately $34.1 million during the remainder of 2025 from the investment securities portfolio and plans to use that liquidity to fund loan growth as well as to fund reinvestments to the investment securities portfolio. Tax equivalent adjusted effective duration for the investment securities portfolio was 5.8 years at September 30, 2025 and 6.0 years at December 31, 2024. Paydowns from prepayments and scheduled payments of $48.1 million were received in the first nine months of 2025, and the amortization of premiums, net of the accretion of discounts, was $3.0 million. There were no sales of available-for-sale investment securities in the first nine months of 2025. No allowance for credit losses was recognized for available-for-sale or held-to-maturity securities as of September 30, 2025 and December 31, 2024. The fair value of the available-for-sale investment securities portfolio as of September 30, 2025 included net unrealized losses of $159.9 million, compared to net unrealized losses of $191.1 million as of December 31, 2024. Unrealized losses in the available-for-sale investment securities portfolio resulted from the declines in market values of the investment securities resulting from the rise in interest rates. The investment portfolio is managed by a third-party firm to provide for an appropriate balance between liquidity, credit risk, interest rate risk management and investment return and to limit the Company’s exposure to credit risk in the investment securities portfolio. The Company does not trade or invest in or sponsor certain unregistered investment companies defined as hedge funds and private equity funds under what is commonly referred to as the “Volcker Rule” of the Dodd-Frank Wall Street Reform and Consumer Protection Act. 50 Table of Contents Real Estate Mortgage Loans Held-for-Sale Real estate mortgage loans held-for-sale decreased by $975,000, or 57.4%, to $725,000 at September 30, 2025, from $1.7 million at December 31, 2024. The balance of this asset category is subject to a high degree of variability depending on, among other factors, recent mortgage loan rates and the timing of loan sales into the secondary market. The Company generally sells conforming qualifying mortgage loans it originates on the secondary market. Proceeds from sales of residential mortgages totaled $16.2 million in the first nine months of 2025, compared to $12.7 million in the first nine months of 2024. Management expects the volume of loans originated for sale in the secondary market to increase if long-term interest rates decline from current levels. Demand for mortgage loans has been impacted by elevated interest rates, limited housing inventory and existing home owners locked in at historically low rates. Mortgage loans serviced for others are not included in the accompanying consolidated balance sheets. The unpaid principal balances of loans serviced for others were $299.0 million and $313.0 million, as of September 30, 2025 and December 31, 2024, respectively. Loan Portfolio The loan portfolio by portfolio segment as of September 30, 2025 and December 31, 2024 is summarized as follows: (dollars in thousands) September 30, 2025 December 31, 2024 Current Period Change Commercial and industrial loans $ 1,518,016 28.9 % $ 1,450,865 28.3 % $ 67,151 Commercial real estate and multi-family residential loans 2,655,250 50.6 2,592,520 50.6 62,730 Agri-business and agricultural loans 339,972 6.5 387,396 7.6 (47,424) Other commercial loans 91,833 1.7 95,584 1.9 (3,751) Consumer 1-4 family mortgage loans 533,542 10.2 490,229 9.6 43,313 Other consumer loans 112,430 2.1 104,041 2.0 8,389 Subtotal, gross loans 5,251,043 100.0 % 5,120,635 100.0 % 130,408 Less: Allowance for credit losses (68,168) (85,960) 17,792 Net deferred loan fees (2,424) (2,687) 263 Loans, net $ 5,180,451 $ 5,031,988 $ 148,463 Total net loans, excluding real estate mortgage loans held-for-sale, increased by $148.5 million, or 3.0%, to $5.180 billion at September 30, 2025 from $5.032 billion at December 31, 2024. The increase was primarily driven by originations of loans concentrated in the commercial and industrial loans, commercial real estate and multi-family residential loans and consumer 1-4 family mortgage loans categories and was offset by paydowns in the agri-business and agricultural loans segment, which traditionally experiences seasonal fluctuations in activity. The following table summarizes the Company’s non-performing assets as of September 30, 2025 and December 31, 2024: (dollars in thousands) September 30, 2025 December 31, 2024 Nonaccrual loans $ 18,701 $ 56,431 Loans past due over 90 days and still accruing 7 28 Total nonperforming loans 18,708 56,459 Other real estate owned 284 284 Repossessions 82 143 Total nonperforming assets $ 19,074 $ 56,886 Individually analyzed loans $ 39,497 $ 78,647 Nonperforming loans to total loans 0.36 % 1.10 % Nonperforming assets to total assets 0.28 % 0.85 % 51 Table of Contents Total nonperforming assets decreased by $37.8 million, or 66.5%, to $19.1 million during the nine month period ended September 30, 2025. The ratio of nonperforming assets to total assets decreased 57 basis points from 0.85% at December 31, 2024 to 0.28% at September 30, 2025. The decrease in nonperforming assets was driven by the $28.6 million partial charge off of a previously disclosed nonperforming loan to a northern Indiana industrial company. A loan is individually analyzed when full payment under the original loan terms is not expected. The analysis for smaller loans that are similar in nature and which are not in nonaccrual or modified status, such as residential mortgage, consumer, and credit card loans, is determined based on the class of loans. If a loan is individually analyzed, a portion of the allowance may be allocated so that the loan is reported, net, at the present value of estimated future cash flows or at the fair value of collateral if repayment is expected solely from the collateral. Total individually analyzed loans decreased by $39.2 million, or 49.8%, to $39.5 million at September 30, 2025 from $78.6 million at December 31, 2024. The decrease to individually analyzed loans was primarily related to the previously disclosed partial loan charge off, which was fully allocated within the allowance for credit losses. Loans are charged against the allowance for credit losses when management believes that the principal is uncollectible. Subsequent recoveries, if any, are credited to the allowance. The allowance is an amount that management believes will be adequate to absorb current expected credit losses relating to specifically identified loans based on an evaluation of the loans by management, as well as other current expected losses in the loan portfolio. The evaluations take into consideration such factors as changes in the nature and volume of the loan portfolio, overall portfolio quality, review of specific problem loans and current economic conditions that may affect the borrower’s ability to repay. Management also considers trends in adversely classified loans based upon a monthly review of those credits. General allowance is determined after considering the following factors: application of loss percentages using a probability of default/loss given default approach subject to a floor, emerging market risk, commercial loan focus and large credit concentrations, new industry lending activity and current economic conditions. Federal regulations require insured institutions to classify their own assets on a regular basis. The regulations provide for three categories of classified loans: Substandard, Doubtful and Loss. The regulations also contain a Special Mention category. Special Mention applies to loans that do not currently expose an insured institution to a sufficient degree of risk to warrant classification as Substandard, Doubtful or Loss but do possess credit deficiencies or potential weaknesses deserving management’s close attention. The Company’s policy is to establish a specific allowance for credit losses for any assets where management has identified conditions or circumstances that indicate an asset is nonperforming. If an asset or portion thereof is classified as a loss, the Company’s policy is to either establish specified allowances for credit losses in the amount of 100% of the portion of the asset classified loss or charge-off such amount. At September 30, 2025, the allowance for credit losses was 1.30% of total loans, a decrease of 38 basis points from 1.68% at December 31, 2024. The decline was primarily attributed to the previously disclosed charge-off. At September 30, 2025, management believed the allowance for credit losses was at a level commensurate with the overall risk exposure of the loan portfolio. However, if economic conditions deteriorate, certain borrowers may experience difficulty and the level of nonperforming loans, charge-offs and delinquencies could rise and require increases in the allowance for credit losses. The process of identifying credit losses is a subjective process. The Company has a relatively high percentage of commercial and commercial real estate loans, which are extended to businesses with a broad range of revenue and within a wide variety of industries. Traditionally, this type of lending may have more credit risk than other types of lending because of the size and diversity of the credits. The Company manages this risk by utilizing relatively conservative credit structures, by adjusting its pricing to the perceived risk of each individual credit and by diversifying the portfolio by customer, product, industry and market area. The Company has limited exposure to commercial office space borrowers, all of which are located in the Bank's Indiana markets. Loans totaling $107.4 million for this sector represented 2.1% of total loans at September 30, 2025. Additionally, commercial real estate loans secured by multi-family residential properties and secured by non-farm non-residential properties were approximately 213.1% of the Bank's risk-based capital at September 30, 2025. The Company continues to monitor the impact of tariffs on its borrowers. As of September 30, 2025, based on management’s review of the loan portfolio, the Company had 97 credit relationships with principal balances totaling $157.2 million on the classified loan list versus 81 credit relationships with principal balances totaling $211.1 million as of December 31, 2024. As of September 30, 2025, the Company had $111.0 million of assets classified as Special Mention, $46.2 million classified as Substandard, $97,000 classified as Doubtful and $0 classified as Loss as compared to $123.6 million, $44.0 million, $43.5 million and $0, respectively, at December 31, 2024. Watch list loans as a percentage of total loans were 3.00% as of September 30, 2025, down 113 basis points from 4.13% at December 31, 2024. In addition to the previously disclosed partial loan charge off, net paydowns and upgrades to other watch list credits further contributed to the decrease in classified loans between December 31, 2024 and September 30, 2025. 52 Table of Contents Allowance estimates are developed by management after taking into account actual loss experience adjusted for current economic conditions and a reasonably supportable forecast period. The Company has annual discussions regarding this methodology with regulatory authorities. Allowance estimates are considered a prudent measurement of the risk in the Company’s loan portfolio based upon loan segment. In accordance with applicable accounting guidance, the allowance is based on information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amounts. For a more thorough discussion of the allowance for credit losses methodology see the "Critical Accounting Policies" section of this Item 2. The allowance for credit losses decreased $17.8 million, or 20.7%, from $86.0 million at December 31, 2024 to $68.2 million at September 30, 2025. The decrease was primarily driven by net charge offs of $29.6 million, offset by provision for credit losses expense. Net charge offs for the nine months ended September 30, 2025 primarily consisted of the previously disclosed $28.6 million partial loan charge off. As the bulk of the Company’s lending activity is concentrated in the commercial loan portfolio, which can result in overall asset quality being influenced by a small number of credits, management has historically considered growth and portfolio composition when determining credit loss allocations. Sources of Funds The Company's sources of funds include a diversified deposit base gathered throughout the Company's footprint and includes a growing mix of commercial, retail and public funds deposit accounts. While the traditional base of core deposits represents the primary source of funding for the Company, the Company has access to a robust array of other liquidity sources, including secured borrowings available from the Federal Home Loan Bank and the Federal Reserve Bank Discount Window. In addition, the Company has access to unsecured borrowing capacity through long established relationships within the brokered deposit markets, Federal Funds lines from correspondent bank partners and Insured Cash Sweep (ICS) one-way buy funds available from the Intrafi network. As of September 30, 2025, the Company had access to $3.585 billion in unused liquidity available from these aggregate sources as compared to $3.681 billion at December 31, 2024. The average daily deposits and borrowings together with average rates paid on those deposits and borrowings for the nine months ended September 30, 2025 and 2024 are summarized in the following table: Nine months ended September 30, 2025 2024 (dollars in thousands) Balance Rate Balance Rate Noninterest bearing demand deposits $ 1,248,876 0.00 % $ 1,249,710 0.00 % Savings and transaction accounts: Savings deposits 284,797 0.06 288,283 0.07 Interest bearing demand deposits 3,662,917 3.32 3,206,452 4.06 Time deposits: Deposits of $100,000 or more 595,367 3.97 814,034 4.55 Other time deposits 208,872 3.36 218,755 3.48 Total deposits $ 6,000,829 2.54 % $ 5,777,234 3.03 % FHLB advances and other borrowings 55,594 4.54 88,605 5.61 Total funding sources $ 6,056,423 2.56 % $ 5,865,839 3.07 % Average total deposits were $6.001 billion for the nine months ended September 30, 2025, an increase of $223.6 million, or 3.9%, from the comparable period in 2024. Average total borrowings were $55.6 million for the nine months ended September 30, 2025, a decrease of $33.0. million, or 37.3%, from the comparable period in 2024. Total average deposit costs decreased 49 basis points from 3.03% for the nine months ended September 30, 2024, to 2.54% for the nine months ended September 30, 2025. Total average borrowing costs decreased 107 basis points from 5.61% for the nine months ended September 30, 2024 to 4.54% for the nine months ended September 30, 2025. As a result, the total cost of funding sources decreased by 51 basis points from 3.07% for the nine months ended September 30, 2024, to 2.56% for the nine months ended September 30, 2025. The decrease in the cost of funding sources between the two periods was attributable to easing of monetary policy by the Federal Reserve Bank which allowed deposit costs to reprice to lower levels and reduced the borrowings average rates. 53 Table of Contents Deposits and Borrowings As of September 30, 2025, total deposits increased by $123.4 million, or 2.1%, from December 31, 2024. Core deposits, which excludes brokered deposits, decreased by $10.7 million, or 0.2%, to $5.849 billion as of September 30, 2025 from $5.859 billion as of December 31, 2024. Total brokered deposits were $175.6 million at September 30, 2025, compared to $41.6 million at December 31, 2024, an increase of $134.1 million, or 322.6%. The following table summarizes deposit composition at September 30, 2025 and December 31, 2024: (dollars in thousands) September 30, 2025 Percentage of Total December 31, 2024 Percentage of Total Current Period Change Retail $ 1,724,983 28.6 % $ 1,780,726 30.2 % $ (55,743) Commercial 2,288,701 38.0 2,269,049 38.4 19,652 Public funds 1,834,987 30.5 1,809,631 30.7 25,356 Core deposits $ 5,848,671 97.1 % $ 5,859,406 99.3 % $ (10,735) Brokered deposits 175,647 2.9 41,560 0.7 134,087 Total deposits $ 6,024,318 100.0 % $ 5,900,966 100.0 % $ 123,352 On September 30, 2025, commercial deposits represented 38.0% of total deposits versus 38.4% at December 31, 2024. Retail deposits represented 28.6% at September 30, 2025 versus 30.2% at December 31, 2024. Public Funds deposits represented 30.5% at September 30, 2025 versus 30.7% at December 31, 2024. Brokered deposits represented 2.9% of total deposits at September 30, 2025 versus 0.7% at December 31, 2024. Commercial deposits expanded $19.7 million, or 0.9%, from $2.269 billion at December 31, 2024 to $2.289 billion at September 30, 2025; public funds deposits expanded $25.4 million, or 1.4%, from $1.810 billion at December 31, 2024 to $1.835 billion at September 30, 2025, due to growth in public funds customers in our footprint; and retail deposits contracted $55.7 million, or 3.1%, from $1.781 billion at December 31, 2024 to $1.725 billion at September 30, 2025. Deposits not covered by FDIC deposit insurance were 57.0% as of September 30, 2025, versus 62.1% at December 31, 2024. Deposits not covered by FDIC deposit insurance or the Indiana Public Deposit Insurance Fund, which insures public fund deposits in Indiana, were 27.0% of total deposits as of September 30, 2025, versus 32.3% as of December 31, 2024. As of September 30, 2025 and December 31, 2024, 97.9% and 98.0% of deposit accounts had deposit balances less than $250,000, respectively. Capital As of September 30, 2025, total stockholders’ equity was $747.5 million, an increase of $63.6 million, or 9.3%, from $683.9 million at December 31, 2024. The increase to total stockholders' equity was driven by net income of $73.5 million less dividends declared and paid of $38.6 million and an improvement of $25.8 million in accumulated other comprehensive income (loss). The impact on equity for other comprehensive income (loss) is not included in regulatory capital. The banking regulators have established guidelines for leverage capital requirements, expressed in terms of Tier 1, or core capital, as a percentage of average assets, to measure the soundness of a financial institution. In addition, banking regulators have established risk-based capital guidelines for U.S. banking organizations. As of September 30, 2025, the Company's capital levels remained characterized as “well-capitalized”. 54 Table of Contents The actual capital amounts and ratios of the Company and the Bank as of September 30, 2025 and December 31, 2024, are presented in the table below. Capital ratios for September 30, 2025 are preliminary until the Call Report and FR Y-9C are filed. Actual Minimum Required For Capital Adequacy Purposes For Capital Adequacy Purposes Plus Capital Conservation Buffer Minimum Required to Be Well Capitalized Under Prompt Corrective Action Regulations (dollars in thousands) Amount Ratio Amount Ratio Amount Ratio Amount Ratio As of September 30, 2025: Total Capital (to Risk Weighted Assets) Consolidated $ 951,402 16.22 % $ 469,250 8.00 % $ 615,891 N/A N/A N/A Bank $ 945,313 16.12 % $ 469,150 8.00 % $ 615,759 10.50 % $ 586,437 10.00 % Tier I Capital (to Risk Weighted Assets) Consolidated $ 883,145 15.06 % $ 351,938 6.00 % $ 498,579 N/A N/A N/A Bank $ 877,056 14.96 % $ 351,862 6.00 % $ 498,472 8.50 % $ 469,150 8.00 % Common Equity Tier 1 (CET1) Consolidated $ 883,145 15.06 % $ 263,953 4.50 % $ 410,594 N/A N/A N/A Bank $ 877,056 14.96 % $ 263,897 4.50 % $ 410,506 7.00 % $ 381,184 6.50 % Tier I Capital (to Average Assets) Consolidated $ 883,145 12.56 % $ 281,287 4.00 % $ 281,287 N/A N/A N/A Bank $ 877,056 12.48 % $ 281,084 4.00 % $ 281,084 4.00 % $ 351,355 5.00 % As of December 31, 2024: Total Capital (to Risk Weighted Assets) Consolidated $ 917,769 15.90 % $ 461,847 8.00 % $ 606,175 N/A N/A N/A Bank $ 909,232 15.76 % $ 461,612 8.00 % $ 605,866 10.50 % $ 577,015 10.00 % Tier I Capital (to Risk Weighted Assets) Consolidated $ 845,352 14.64 % $ 346,385 6.00 % $ 490,713 N/A N/A N/A Bank $ 836,845 14.50 % $ 346,209 6.00 % $ 490,463 8.50 % $ 461,612 8.00 % Common Equity Tier 1 (CET1) Consolidated $ 845,352 14.64 % $ 259,789 4.50 % $ 404,116 N/A N/A N/A Bank $ 836,845 14.50 % $ 259,657 4.50 % $ 403,911 7.00 % $ 375,060 6.50 % Tier I Capital (to Average Assets) Consolidated $ 845,352 12.15 % $ 278,369 4.00 % $ 278,369 N/A N/A N/A Bank $ 836,845 12.03 % $ 278,240 4.00 % $ 278,240 4.00 % $ 347,800 5.00 % 55 Table of Contents FORWARD-LOOKING STATEMENTS This document (including information incorporated by reference) contains, and future oral and written statements of the Company and its management may contain, forward-looking statements, within the meaning of such term in the federal securities law. Forward-looking statements are not historical facts and are generally identifiable by the use of words such as “believe,” “expect,” “anticipate,” “project,” “possible,” “continue,” “plan,” “intend,” “estimate,” “may,” “will,” “would,” “could,” “should” or other similar expressions. Additionally, all statements in this document, including forward-looking statements, speak only as of the date they are made, and the Company undertakes no obligation to update any statement in light of new information or future events. The Company’s ability to predict results or the actual effect of future plans or strategies is inherently uncertain and, accordingly, the reader is cautioned not to place undue reliance on any forward-looking statement made by the Company. Actual results could differ materially from those addressed in the forward-looking statements as a result of numerous factors, including, without limitation: • the effects of future economic, business and market conditions and changes, particularly in our Indiana market area, including prevailing interest rates and the rate of inflation; • governmental trade, monetary, tax and fiscal policies, including effects of the ongoing shutdown of the federal government; • the risks of changes in interest rates on the levels, composition and costs of deposits, loan demand and the values and liquidity of loan collateral, securities and other interest sensitive assets and liabilities; • changes in borrowers’ credit risks and payment behaviors; • the failure of assumptions and estimates used in our reviews of our loan portfolio, underlying the establishment of reserves for possible credit losses, our analysis of our capital position and other estimates; • the performance of our commercial real estate loan portfolio, including the effects of the elevated interest rate environment, the strength of the commercial real estate market in our Indiana markets, and recent changes in retail and office usage patterns; • risk of cybersecurity attacks that could result in damage to the Company's or third-party service providers' networks or data of the Company; • the timing and scope of any legislative and regulatory changes, including changes in banking, securities and tax laws and regulations and their application by our regulators; • the effects of competition from a wide variety of local, regional, national and other providers of financial, investment and insurance services; • the effects of war or other conflicts, acts of terrorism or other catastrophic events, including storms, droughts, tornados and flooding, that may affect general economic conditions, including agricultural production and demand and prices for agricultural goods and land used for agricultural purposes, generally and in our markets; • the effects of fraud by or affecting employees, customers or third parties; • the effects of disruption and volatility in capital markets on the value of our investment portfolio; • changes in the prices, values and sales volumes of residential real estate; • changes in the scope and cost of FDIC insurance, the state of Indiana’s Public Deposit Insurance Fund and other coverages; • the impact of litigation and other claims we may be subject to from time to time; • changes in the availability and cost of credit and capital in the financial markets; • changes in technology or products that may be more difficult or costly, or less effective than anticipated; • changes in accounting policies, rules and practices; • the risks related to mergers, acquisitions and divestitures, including, without limitation, the related time and costs of implementing such transactions, integrating operations as part of these transactions and possible failures to achieve expected gains, revenue growth and/or expense savings from such transactions; and 56 Table of Contents • the risks noted in the Risk Factors discussed under Item 1A of Part 1 of our Annual Report on Form 10-K for the year ended December 31, 2024, as well as other risks and uncertainties set forth from time to time in the Company’s other filings with the SEC. These risks and uncertainties should be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements.